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Flexible Spending Accounts: Use it or lose it? Maybe not this year

While FSAs are usually "use it or lose it" by the end of the year, Congress is temporarily allowing eligible contributions to roll over if your employer allows it.

INDIANAPOLIS — If you have health care coverage, you might have a Flexible Spending Account, or FSA.

What's an FSA? 

An FSA is a special, tax-free account designed for out-of-pocket medical expenses. 

Out-of-pocket medical expenses include everything from deductibles and copayments to over-the-counter drugs. This includes items like cough or allergy medicine.

In 2021, FSAs are limited to $2,750 per year per employer. In 2022, the dollar amount increases to $2,850.

FSAs are different from Health Savings Accounts. 

What if I don't spend my money? 

While FSAs are usually "use it or lose it" by the end of the year, Congress said you can roll over all of your eligible contributions if your employer allows it.

This is a temporary rule because of the COVID-19 pandemic. 

Normally, employers could offer one of two options:

  • Provide a grace period of up to 2.5 extra months to use the money in your FSA.
  • Carryover up to $550 per year to use in the following year.

Employers cannot offer both options. 

In 2022, the carryover amount increases to $570.

To find out if your company adopted an extension, call your FSA benefits manager. 

Should your company not offer the carryover option or a grace period, spend the money by Dec. 31. 

How do I spend it? 

While you can use the money for large medical expenses, you can also use it on everyday items.

To help you out, stores like Amazon have an FSA section with eligible items.

Some of the eligible items include sunscreen, acne products, shoe inserts and feminine care.

If you do not have a benefits debit card, save your receipts and documentation for reimbursement.

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